Elpida explores bailout, mergers

Japanese DRAM manufacturer, Elpida Memory, Inc. is reported to be exploring a government bailout. Without the aid of government funds, Japan's DRAM industry will likely remain in peril throughout the global recession. On the other hand, a bailout combined with bold corporate moves, such as mergers or consolidation with Elpida's competitors in Taiwan, could establish the current No. 3 DRAM vendor as a formidable memory manufacturer—possibly, big enough to challenge market leaders Samsung Electronics and Hynix Semiconductor.

Should memory cos consolidate?Analysts urge memory makers to consolidate and forget about bailouts to restore profitability in the sector. Is this a good idea?

Or not.

This, at least, is "one of the scenarios" Elpida is spinning today, a company spokesman told EE Times.

Tokyo-based Elpida is "considering" applying for Japanese government's funds to beef up its capital. Elpida may seek "several tens of billions of yen," the Nikkei newspaper reported Feb. 4.

The Elpida spokesman, however, declined to comment on its applications for the aid programme, noting that a bill approved by Japan's Cabinet for troubled non-financial institutions to receive public funding, is still waiting passage into law by the Japanese Diet.

Elpida is expecting to post a net loss of more than Rs.5,503.50 crore (100 billion yen) for the fiscal year ending in March. The battered Japanese memory maker, however, does not have liquidity problems, acknowledged the spokesman.

Nevertheless, the semiconductors sector is a notoriously capital-intensive business. "If we had more money for investment, we could act more quickly and more decisively," the Elpida spokesman said. The company is also finding fewer sources to tap for capital amid the global economic crisis, he explained.

Merger talksSince late last year, Elpida has been in talks with Taiwan DRAM manufacturers including Powerchip Semiconductor Corp., ProMOS Technologies Inc. and Rexchip Electronics Corp., on a possible merger and other options such as integrating management. Taiwan DRAM companies are also seeking Taiwanese government funding and loan-repayment extensions.

What is DRAM?
Dynamic random access memory (DRAM) is a type of random access memory that stores each bit of data in a separate capacitor within an IC. Since real capacitors leak charge, the information eventually fades unless the capacitor charge is refreshed periodically. Because of this refresh requirement, it is a dynamic memory as opposed to SRAM and other static memory. And unlike non-volatile firmware chips, both DRAM and SRAM lose their content when the power is turned off.